Sports Stocks Edge Higher in March on Consumer Confidence Bounce
The Sportico Sports Stock Index barely budged in March. But that, it seems, is a good thing.
“With the headlines in play—bank failures, a recession coming, commercial real estate starting to crash, and so forth—I would have expected more concerns,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, the largest registered investment advisor in the U.S. with $170 billion in assets under management. “But it seems that people are realizing that, despite all the headlines, things are actually not all that bad.”
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The reason, according to McMillan, is that consumer confidence is high across the board. The Conference Board Consumer Confidence Index, a widely watched measure of market confidence, showed a mild boost in confidence last month, holding a trend of generally rising confidence since exiting the brief pandemic recession. For sports stocks, which are sensitive to consumer spending, it was enough to tick the Sports Stock Index up almost 1% in March to 1,166. That move lagged the S&P 500, which gained 5%, but it’s a nice rebound from February, when the Sportico index dropped 6%.
The best-performing sports stock of the month has one type of particularly confident customer: sports teams and operators of sports facilities. Daktronics (DAKT), a South Dakota-based microcap (it has a $249 million market capitalization), makes various LED signs and video boards for a variety of purposes worldwide, but it’s best known for dominating the North American market for stadium displays. Daktronics has 55% market share of video board overall in North America, but claims close to 100% share in certain categories of very large displays used by American and Canadian sports teams—it is producing an acre-sized video screen for the new L.A. Clippers arena, for instance. The company’s shares gained 37% after reporting a strong quarter in which it sold $185 million of product—a 32% rise—and gave a strong outlook for its U.S. business. CEO Reece Kurtenbach said during Daktronics’ early March earnings call that the company remains a technology leader in scoreboards, “which allows us to be strategic in our pricing and contract terms while being very mindful of profitability.” In other words, that new Jumbotron is going to cost ya.
Also posting double-digit percentage gains in March was Shift4Payments (FOUR), a mobile payment provider with a strong presence in stadium digital payments—it processes all ticketing transactions for the Florida Panthers and Cleveland Cavaliers and all ballpark payments at Camden Yards. The company also has a business line focused on gaming and sports betting (as well as a business division named, unironically, “Sexy Tech,” which offers touchless payment services). Shift4Payments shares added 17% in March on general bullishness around alternative payment processors, which continue to take market share from traditional banks as consumers demand new, quicker and easier ways to pay for goods and services.
Overall, the Sports Stock Index saw 24 of its 40 component stocks gain in March, with 16 losers. For the year, sports stocks are up nearly 11%, after tumbling 32% in 2022.
Decliners in the index were largely mild decreases, aside from three stocks that suffered double-digit losses in March. Worst off was Fubo (FUBO), which surrendered 36% in the month, despite a brand relaunch—dropping TV from its name—emphasizing a sports-centric motto, “What if sports fans built a streaming service.” Fubo said it was responsible for the two-thirds of total subscriber growth in 2022 among multi-video channel provider distributors, a segment that includes traditional cable giants like sports stock component Comcast (CMCSA, up 2% in March). Last week, Fubo added MLB.TV to its programming options, which, for $25 a month, provides streaming access to every out-of-market game. Still, while sports fans appear to like the service based on 2022 gains, Fubo could use some sports fans buying its stock. Shares closed the month at $1.21 and have failed to effectively counter bearish pressure in a year and a half.
Rush Street Interactive (RSI) lost 26% after reporting mediocre—neither particularly good nor bad—sports betting results for its fourth quarter then announcing it was winding down its sports betting partnership with Connecticut. Dropping the state won’t materially impact its results, Rush Street said, but in a market where sports betting stocks continued to be viewed skeptically—four of the eight sports wagering stocks in the index declined last month—the news only increased negative sentiment for its shares. Also seeing a step decline in March was Faze Holdings (FAZE), the parent of esports behemoth FaZe Clan. Faze reported full year 2022 results Thursday night, coming in woefully short of the sales figure it had dangled in front of investors during its 2021 SPAC merger process. Faze produced $70 million in 2022 revenue when it had projected $91 million when going public. In another often-negative signal to shareholders, the company declined to offer guidance for 2023. Faze shares now trade at 46 cents, putting the company at risk of delisting from the Nasdaq Stock Market and representing a nearly 98% decline in value since August.
The Sportico Sports Stock Index launched in August 2020 at a level of 1,000. It is an equal-weighted basket of 40 stocks traded in the U.S., rebalanced quarterly, that are meant to reflect the strength of the North American sports business. Components include publicly trade teams, including Manchester United (MANU, up 7%), sports-reliant broadcasters such as Diamond Sports owner Sinclair Broadcast Group (SBGI, up 7%,) and companies reliant on live events and fandom consumption, including Aramark (ARMK, down 3%.)
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